The pivotal vote on the Public Utility Commission suggested Tuesday that she is leaning toward redesigning the state’s wholesale electricity market to address long-term forecasts of power shortages.
Brandy Marty, who was appointed to the PUC this summer, said the three-member commission could decide whether to mandate a level of electricity reserves — as opposed to relying on the existing target — before the PUC receives a cost-benefit analysis expected to be completed early next year.
“Certainly one option would be to make the decision to adopt a mandatory reserve margin and not be able to build anything around that until we have the information on what that exactly should look like,” Marty said.
Her remarks, coming before the Senate Committee on Business and Commerce, are likely to be interpreted as favoring redesigning the wholesale electricity market — a prospect that critics have warned could raise electricity rates.
After Tuesday’s hearing, Marty told reporters that the industry and consumers should not assume the ultimate solution would be the capacity market favored by most owners of power plants.
“I think people’s minds go there because of the model we’ve seen, but Texas tends to do what’s best for Texas and there are going to be components from several different markets,” she said. “I don’t know yet because we are waiting for information.”
Currently, the PUC sets a target for power reserves but relies on the private sector to build the necessary generation capacity. But wholesale electricity prices have been too low recently to encourage much new investment.
By mandating the reserve margin, the PUC would then have to create a new system to fill the gap between the power that is needed and what is available.
Faced with long-term forecasts of power shortages, a coalition of generation companies have been lobbying for additional “capacity” payments that would be charged to customers. Currently, power providers make money only when they sell electricity.
Consumers, including some of the state’s largest industrial companies, oppose a capacity market as enriching power generators without necessarily guarding against rolling blackouts. They say changes the PUC has already approved, including higher caps on wholesale prices, should be given time to work.
Donna Nelson, PUC chairman, favors a capacity market while Commissioner Ken Anderson Jr. opposes it. Marty is expected to break that tie. All three are appointees of Gov. Rick Perry.
Marty said she expects the commission to decide on a timeline for making a decision at its meeting next week. But on Tuesday she predicted the issue would be resolved early next year after the PUC receives two reports.
The Electric Reliable Council of Texas, which manages the state’s largest grid, is expected to issue a new forecast of power needs in December. The agency is fine-tuning the forecast’s underlying assumptions.
The Brattle Group, the PUC’s consultants, is working on a cost-benefit analysis looking at how much additional generation should cost. It is due early next year.
Marty said both reports are vital pieces of the puzzle.
“I think it would be hard to fill in the blanks of exactly what a market construct looks like until we have the Brattle report,” she said.
Likewise, ERCOT’s new forecast is expected to give the PUC a more accurate picture of possible long-term shortages.
“We have to know what it is we’re shooting for, what our goal is,” Marty said. “If it’s going to be two hours in the summer, if it’s going to be five minutes in the summer, if it’s going to be two days in the summer. These are all very different models that we have to consider in constructing a new market.”
She told reporters that her team of staffers came up with the suggestion that the PUC could determine whether to mandate a level of reserves while waiting for the Brattle study.
She said regulatory uncertainty is preventing some investors from building new power plants or improving existing ones.
“The very fact this question is open affects our market,” Marty said. “It creates uncertainty. The sooner that it’s addressed, the better for everybody.”
Besides sending a signal to the investment market, a PUC decision on whether the agency will mandate a reserve level also may lessen the pressure from the Legislature to resolve the issue.
“I am asking the same questions I asked two years ago and last year,” said Sen. Leticia Van de Putte, D-San Antonio. “I had expected decisions to be quicker.”